Many advisers report that the main reason their clients are in arrears is because they have over-committed. Previously the main reason cited was an adverse change in the client’s life caused by such circumstances as unemployment, divorce or bereavement. But most debt cases involve a combination of bad luck, change of circumstances, inexperience and a bit of greed and naivety. Lenders need access to more information than they currently have to make the best decisions. This would include magistrate’s court fines, student loans, tax/national insurance and VAT arrears, registration with credit reference agencies of housing associations or local authority rent arrears and council tax arrears.

Most lenders lend responsibly, but there are some whose lending policies give cause for concern as they result in a higher than average level of arrears. So allowing access to information about borrowers might help lenders make a decision on their ability to repay. However, regardless of the information available, it is inevitable that a percentage of borrowers will get into difficulty and that, on occasion, lenders will lend inappropriately. Improved literacy and numeracy skills might increase the number of consumers able to make informed decisions about their borrowing, but it is difficult to imagine that any campaign to improve financial literacy would have any real impact on the small percentage of borrowers who consistently get into difficulty.

When it comes to helping borrowers in debt, there is a need for far greater availability of independent advice. This would require additional funding from local authorities, the government, lenders and debt collectors.

However, for voluntary organisations, any additional funding will never be enough to meet demand. Freeing up the voluntary sector to handle the most disadvantaged cases of over-indebtedness, there exists an important role for profit making organisations as providers of debt advice. Some might take a pessimistic view about the chances of changing consumer behaviour in relation to borrowing, particularly as prevention is better than cure. In reality most people who experience financial problems resolve their difficulties without resorting to a third party. We believe this is as it should be – a situation that has been made possible because most high street lenders have adopted flexible, fair and sympathetic collection policies and procedures for assisting borrowers who find themselves in financial difficulty.

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